Newsletter

715 000 Belgian households face a risk of energy poverty

There is currently no official definition of energy poverty and, hence, no specific indicator of the problem. Sia Partners estimates that 15% of Belgian households face a risk of energy poverty.

Though everyone agrees on the necessity to tackle energy poverty, there is currently no European characterization of this social issue and, so far, Belgium has not adopted an official definition. As a matter of fact, no specific indicator has been developed and progress - or worsening - cannot be measured. Stakeholders, such as public authorities and energy suppliers, have thus to rely on scattered pieces of information that impede them from developing a global strategy to tackle the issue.

In this context, Sia Partners built its own view by consolidating different axes of analysis to fairly assess the number of households facing a risk of energy poverty.

Based on historical consensus and a somehow arbitrary threshold, it is widely referred to in the literature that a household is usually considered as energy-poor if it dedicates more than 10% of its income to energy expenses. In the case of Belgium, calculations based on official figures report that the decile of the population with the lowest revenues spends more than 10% of its income in energy.

Nevertheless, Sia Partners thinks that this gross figure hides part of the reality. Indeed, the 10% threshold underestimates the actual number of energy-poor households by not taking into account households that deprive themselves to keep their energy expenses under control. After a statistical adjustment of the first results about the deciles of the population, Sia Partners exploited EU's Statistics on Income and Living Conditions (EU-SILC) to refine its assessment of energy poverty with information on difficulties for households to pay for their energy consumption. In its calculation, and in order to avoid double counting, Sia Partners applied literature-based ratios to exclude the overlap between households that are both above the 10% threshold and unable to pay for their energy.

This comprehensive approach makes Sia Partners confident that the highlighted result better depicts the reality of energy poverty in Belgium: 15% of the Belgian households (i.e. 715 000 households) face a risk of energy poverty with a +/- 3% margin error. Comparable results are obtained in France by the Abbé Pierre Foundation with 14.5% of the French households (i.e. 4 000 000 households).

Source : Sia Partners' calculations

High energy prices are one of the drivers of energy poverty. To decrease these prices, the Federal government decided to lower the VAT rate on electricity from 21% to 6% as from April 2014. While this measure will have positive effects in terms of energy poverty, it will only affect the electricity bill. Hence, the VAT cut should lower households' energy expenses by 5%. Consequently, according to 2012 figures, Sia Partners estimates that the share of energy-poor households would decrease by 1 to 2% (i.e. leaving 13% to 14% of the households in energy poverty).

However, these results require two remarks:

The effects of the VAT cut on energy poverty will really be felt in 2015, as households in general will continue to pay their monthly fixed advances to their supplier based on their 2013 consumption;

Even if the VAT cut will indeed lower the number of households that dedicate more than 10% of their income to energy expenses and may help the 6% of households facing payment difficulties, it has a marginal impact and does not tackle the root of the problem.

Although there is neither a concrete definition nor shared guidelines, Belgian authorities have developed energy-related policies that can decrease or limit energy poverty:

Energy price: they aim at reducing the unit price of energy, thereby making it more affordable to vulnerable households (e.g. Protected Customer status, progressive tariffs);

Access to energy: they guarantee a minimum (even if limited) energy supply (e.g. using budget meters for gas);

Energy consumption: they lead to a lower consumption level (e.g. aid and loans for investments in energy efficiency, energy guidance).

However, even if all these policies can potentially improve energy-poor households' situation, none of them is specifically designed to tackle energy poverty because of the absence of a global framework. Consequently, some potential beneficiaries may not be aware of policy measures (e.g. energy guidance) or able to benefit from them (e.g. when the household still has to contract a loan in order to make the necessary investment). In some extreme cases, they may even be disadvantaged by these policies because their costs are spread among all energy users including energy-poor households that should be exempted.

Consequently, the very first step in the fight against energy poverty is to establish an official definition and to set up consistent related indicators, thereby making possible an efficient (no only effective!) design and follow-up of the policies. This design can then be further improved by integrating feedbacks from all stakeholders in order to build pragmatic solutions, leading eventually to the combination of different policies, reinforcing each other in tackling energy poverty.

The energy transition, symbolized by the 20-20-20 objectives, led (and will lead) to energy- and climate-related policies that increase energy costs, one of the main causes of energy poverty. Given the already large share of the population affected by energy poverty, can society afford a worsening of the problem?